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Post by
Addison1 on Aug 24, 2008 1:07pm
Gold news
The gold rush is still on
Yes, the precious metal has pulled back with other commodities. But the underlying trends still suggest it will climb to $1,000 and beyond.
By Michael Brush
August 20, 2008
Gold bugs have seen their precious metal tarnish this summer.
Devotees of the yellow metal -- which they believe protects their wealth against everything from inflation to Armageddon -- have watched in horror as gold has slumped 19% in a month to $790 an ounce.
Not even Russia's invasion of Georgia could rouse bullion, which normally shoots up in times of geopolitical crisis.
The apparent cause of gold's drop: Many investors are changing a course that saw them buying commodities while betting against financial stocks and the U.S. dollar. A global economic slowdown has raised doubts about sustained demand, and U.S. policymakers have gotten more serious about bailing out the country's banks.
This reversal has sent the whole commodities sector down, including gold, which flirted with $1,000 an ounce as recently as March (as I had predicted in "Why gold's going straight to $1,000").
Gold bugs are about to get some relief. The truth is, despite this pullback, the fundamentals that drove gold higher haven't changed.
Four reasons gold will rebound
The near-term catalyst for the next move up could be as simple as holidays that call for giving gold as a gift, including Diwali (the Hindu "Festival of Light"), Christmas and the Chinese new year. Demand for gold to produce jewelry should soon kick in.
In fact, looking back over the past three decades, it's really no surprise that gold is weak right now. "Gold is always a dog in August. Always," says Frank Holmes, the chief investment officer at U.S. Global Investors (GROW.O), which offers the Gold and Precious Metals Fund (USERX). Then the price climbs as the holiday season approaches, Holmes says.
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